Small Business Professional Liability Insurance: Tailored Protection for Growing Companies

Growing service companies need to have a policy in place to cover them from claims that arise out of professional work errors or omissions. Service providers are at particular risk of being sued for bad service. A professional liability insurance policy can help protect a growing business from this type of litigious onslaught. 

What Is Small Business Professional Liability Insurance?

Professional liability insurance, sometimes called errors and omissions insurance, is a type of insurance policy a company can get to handle claims that say the service provider didn’t do their job appropriately. Either the wrong information was given or there was some sort of omission that led to financial loss for the client. This insurance policy pays the claim amount as well as funds a legal defense established by the insurance company on behalf of the policyholder. 

Key Features of Professional Liability Insurance

Professional liability insurance has certain key features defining it from general liability insurance. 

Coverage Components

The common coverage components of professional liability insurance are:

• Negligence: When you take reckless action on the client’s behalf, that results in a financial loss. 
• Misrepresentation: When you lead a client to think about things in one way when it isn’t really factually correct. 
• Inaccurate advice: When you give the client the wrong information. 
• Personal injury: When your work leads to a personal injury of the client. 
• Copyright infringement: If you inadvertently infringe on the copyright or trademark of another party, that leads to financial loss. 
• Defense costs: Pays the legal fees associated with defending you in a professional liability claim.  

Common Exclusions and Limitations

Common exclusions for the professional liability insurance policy claim include:

• General liability claims: Third-party claims where bodily injury or property damage results from general business operations. 
• Workers’ compensation claims: Employee injuries resulting from work-related incidents.
• Intentional wrongdoing: Intentional acts are not covered by the policy.
• Discrimination: Taking action that is solely based on a person’s race, gender, or disability. 

Types of Professional Liability Insurance for Small Businesses

As mentioned, small business professional liability insurance is often referred to as errors and omissions insurance. These are the same policies with the same coverage. You may also find a specialized policy for medical professionals called malpractice insurance. 

How Professional Liability Insurance Protects Small Businesses

Professional liability insurance protects a small business with:

• Risk mitigation: Transfers the financial risk of claims with the coverage of the business. 
• Legal cost coverage: The insurance company provides a legal team to defend you against claims and help protect your reputation.

Factors Affecting the Cost of Professional Liability Insurance

The factors that affect professional liability insurance coverage include: 

• Business size: How much business you do annually will affect your premium as those doing more work are more likely to have a claim. 
• Industry: Some industries are more litigious than others. Good examples are the medical and legal professions. 
• Coverage limits: How much coverage you get will affect your premium. 
• Deductibles: When you take on more financial risk, you can reduce the cost of your policy without sacrificing coverage. 
• Claims history: The more claims you have, the more your policy will cost. 

Choosing the Right Professional Liability Insurance for Your Small Business

Getting the right policy often means getting the right provider who understands your needs and risks. 

Assessing Business Risks

Take an honest assessment of your company and talk to others in the industry who face the same risks you do. Get a sense for how much coverage you need based on industry standards and historical data. 

Considering Costs

While you shouldn’t make a decision solely based on price, you do want to get a policy that fits into your budget while providing the coverage that you need. 

Comparing Insurance Providers

Every insurance provider has an “appetite” for certain industry risks. This is their sweet spot of the types of companies that they want to cover, and they are able to do so for a reasonable price. Shop the same coverage around to ensure you get a policy that meets your needs. 

Maintaining and Renewing Professional Liability Insurance

Once you purchase a professional liability insurance policy, you need to maintain it to ensure you continue to get the best price for your needs and that the policy grows as your small business grows. 

Policy Review and Updates

Review the policy annually with your insurance agent. Look at the coverages and consider how your small business has grown within the year. This will adjust the risk your company is at for a claim. Adjust the policy accordingly. 

Handling Claims Effectively

Keeping claims down will help keep prices down. When you have a claim, provide the insurance company with all pertinent data related to the claim. Ensure they have access to company documents, such as contracts and work orders, that will back up your assertion that you did nothing wrong.  

Protect Your Company with Small Business Professional Liability Insurance

Getting a small business professional liability insurance policy doesn’t need to be a difficult task. Shop among our best professional liability providers to get a policy that meets your needs for a competitive price.